AML Solutions for Dealers in Precious Metals & Stones

What are Dealers in Precious Metals & Stones

Dealers in Precious Metals & Stones encompass any dealer who, as an individual or entity, is engaged in these businesses:

Production of precious metals and stones at mining operations

Function as intermediate buyers and brokers

Precious stone cutters, polishers, and precious metal refiners

Jewellery manufacturers who use precious metals and stones

Jewellery Retailers, buyers and sellers in secondary and scrap markets

For the purpose of AML compliance, “Precious Metals and Stones (PMS)” would include:

1. Precious Metals such as Gold, Silver, Platinum, and Palladium. Its physical properties, high value, and high liquidity make it a preferred choice in jewellery making. Due to their high value in global trade, these metals are a favourite choice for laundering activities.

2. Precious Stones such as Diamonds, Emeralds, Rubies, etc. These are highly valuable assets due to their portability across borders and can be easily concealed, combined with the subjective nature of valuation, making them an attractive tool for launderers to hide illicit funds.

AML Solutions for Dealers in Precious Metals & Stones enable them to automate their AML compliance function.

Dealers in Precious Metals and Stones in the Anti–Money Laundering Context

Dealers in precious metals and dealers in precious stones are subject to AML compliance to safeguard their business operations and the overall PMS ecosystem from being exploited by money launderers. Money obtained through corruption, drug trafficking, and terrorist activities is often invested in gold and diamond purchases to make it clean. Dealers of precious metals, stones or jewels can be drawn into money laundering schemes, for example, by criminals who use dirty money to buy gold coins, diamonds, or precious jewellery. The launderer then resells them to introduce the proceeds into the financial ecosystem as clean money. Dealers in precious metals, dealers in precious stones and jewellers are particularly vulnerable to money laundering and terrorism financing risks because precious metals and precious stones can be:

Certain geographical factors, which include the presence of mining activities in certain countries, could lead to a large number of DPMS, potentially increasing the risks of money laundering. Some countries are considered a global hub for trading of precious metals and stones, especially gold & diamonds, which are often facilitated by financial institutions in certain jurisdictions, thus making them an attractive location for criminals to launder money. Some low-tax countries with high secrecy regulations, serving as major financial centres, can be exposed to money laundering risks as they ensure anonymity while facilitating illicit activities.

Thus, key AML control measures are necessary to mitigate the high risks associated with the precious metals and stones (PMS) sector. It should be a part of the routine business operations of a dealer in precious metals and stones, ensuring that the business does not become a conduit to financial crime. RapidAML provides best AML solutions to DPMS sector and helps jewellers fight ML/FT effectively.

Dealers in Precious Metals & Stones and Their AML Compliance Challenges

Precious metals, stones, and jewels possess unique physical and commercial properties which carry high value, are highly liquid, and can be transported easily across borders, which makes them a prime target for money laundering and terrorist financing. The definition of a “dealer” as persons conducting designated business and professions varies across jurisdictions, as a transaction that triggers AML obligations in one country may not be identical to another because of differing laws and regulations across jurisdictions, thus posing significant AML compliance challenges. Some common challenges that DPMS face are:

Accordion Q&A

Difficulty in identifying Ultimate Beneficial Owners (UBOs) in the case of complex ownership structures

DPMS operates in an environment uniquely vulnerable to financial crime, which creates opportunities to obscure the flow of funds across borders by threat actors using complex corporate structures involving multiple layers of ownership, shell companies and offshore accounts to hide who ultimately benefits from the transactions, which further heightens AML risks. Natural persons, known as UBOs, are classified as such, where the percentage of holding or control to classify a natural person as a UBO differs across jurisdictions. Identification of UBOs is an AML compliance obligation in most countries, and DPMS finds it difficult when they come across such legal entities involved in a web of unrelated activities to verify the ownership details.

Difficulty in applying effective CDD measures for high-risk customers

AML regulations require DPMS to take risk into account when deciding the extent of CDD measures. Dealers in precious metals and dealers in precious stones may thus reduce or simplify the required measures, but cannot avoid them completely. They must perform enhanced due diligence for higher-risk customers and counterparties, as well as business relationships and transactions. As DPMS engage in a wide range of business activities, criminals could exploit regulatory gaps by providing incomplete or inaccurate information. Many DPMS have an unclear understanding of the business transactions covered by AML regulations, which causes ambiguity in the implementation of customer onboarding protocols, leading to inefficient application of KYC and CDD measures.

Heavily dependent on Tourists

The tourism industry immensely contributes to the DPMS’s sector customer base. A critical AML compliance challenge occurs when tourists use varied payment methods such as third-party payments, funds from an offshore account or a combination of both. Customers may exhibit unusual behaviour such as a lack of concern for market prices, an eagerness to expedite transactions without legitimate reasons or a complete disregard for resale value, which are significant red flags. However, the non-stationary nature of tourists creates a significant challenge to undertaking comprehensive Customer Due Diligence (CDD) processes and monitoring.

Difficulty in ongoing monitoring of a business relationship

The lack of clarity about regulatory compliance requirements, resource constraints, and errors in determining periodicity or frequency of ongoing monitoring due to poor implementation of risk-based classification of customer relationships are a few of the many causes highlighting the difficulty in implementing ongoing monitoring effectively.

Difficulty in maintaining AML/CFT records

An AML/CFT program should be a living document, changing as new circumstances arise and adapting itself to increased understanding of its elements, such as information derived from periodic review, monitoring suspicious activity and responding to the recommendations. DPMS should ensure that regulatory record-keeping and regulatory requirements are met and that any changes are incorporated. Being a cash-intensive business, the purchase and sale of high-value goods pose a structuring of transaction risk, further complicating the audit trail. This creates a critical AML compliance challenge due to dealers’ inability to take proportionate monitoring actions in the absence of paper records.

Ineffective name screening processes

Screening is an essential part of KYC as it helps businesses reduce the incidence of financial crimes such as ML/FT/PF by ensuring continuous and effective customer monitoring along with identification of high-risk customers. It requires the most effort and expertise in terms of subscription to relevant screening lists or watchlists. If screening is not effective and dealers do not continuously update the databases, AML program of a DPMS could fail and expose them to severe financial crime risks. The few reasons behind the ineffective screening process include reliance on manual screening processes due to a lack of resources, legacy systems, and the occurrence of false positives due to poorly configured systems or assuming the name screening process as a one-off thing, making the process ineffective.

Unavailability of skilled compliance staff

Dealers in Precious Metals and Stones can vary from very small independent shops to worldwide chains with hundreds of outlets. Some do not have enough capacity to dedicate resources to AML/CFT campaigns or reporting. They will be exposed to ML, FT, and PF vulnerabilities due to the limited number of skilled experts who can appropriately enforce the regulations applicable to the sector. There is a greater need for more expert staff capable of making sound judgments.

Legacy AML/CFT compliance software

When DPMS rely on legacy AML compliance software which are not scalable and cannot be attuned to keep pace with the evolving regulatory landscape, emerging ML/FT typologies, red flags, updated sanctions, and terrorist watchlists, AML compliance becomes ineffective. Legacy systems do not capitalise on the magic of fuzzy matching and AI, which can simplify their AML compliance challenges. Data security and data privacy are also at risk due to legacy systems.

Difficulty in the timely reporting of suspicious transactions and activities

When DPMS relies on manual or legacy systems, which are ineffective in handling a large volume of customer data across multiple sanction lists, it is prone to missing out on timely reporting of suspicious transactions and activities to the regulators. This could lead to a breach of AML reporting requirements applicable in their country.

Difficulty in adopting a Risk-Based Approach (RBA)

Implementing a risk-based approach (RBA) requires that dealers have a sound understanding of the risks and can exercise sound judgment. This requires the building of expertise through training, recruiting, or taking professional advice. Attempting to pursue a risk-based approach without sufficient expertise may lead to flawed judgments. Dealers may overestimate risk, which could lead to wasteful use of resources, or they may under-estimate risk, thereby creating vulnerabilities.

Polish Your Process

AML Compliance Tips for Dealers

AML Solutions for Dealers in Precious Metals and Stones

AML Software for Dealers in Precious Metals and Stones

Name Screening Software

KYC Software

Customer Risk Assessment Software

Transaction Monitoring Software

Regulatory Reporting Software

Case Management Software

AML Consultancy Services for Dealers in Precious Metals and Stones

Enterprise-Wide Risk Assessment Services

AML Policy Documentation Services

KYC & CDD Managed Services

In-House AML Compliance Department Setup Services

Regulatory Reporting Services

AML/CFT Training Services

AML/CFT Health Check Services

How Can Unified AML Compliance Software Solve AML Compliance Challenges for Dealers in Precious Metals and Stones?

All that glitters should be compliance gold!

RapidAML, a unified AML software, is the phoenix that rises from the ashes of manual compliance processes and rekindles a fire of hope for Dealers in Precious Metals and Stones, who need not be lost in the shadows but rather follow the light that will guide them through the global regulatory maze. A unified AML platform integrates several critical functions such as KYC/CDD automation, regulatory reporting, and case management into a single, cohesive system, providing DPMS with a holistic view of risk.

Compliance Lifecycle Management

A unified AML software is built on core principles of AML compliance, which provides a comprehensive risk-based program that every Dealer in Precious Metals and Dealers in Precious Stones should implement. These principles take care of an end-to-end AML compliance requirements, starting from customer onboarding, transaction monitoring, regulatory reporting and record keeping, all through a single unifying case management dashboard.

Streamlining Workflows and Templates

A unified AML software helps DPMS customise workflows for prioritising alerts based on their risk levels to help the compliance team focus on those alerts that matter the most. Centralised data management helps the AML compliance officer and senior management track the progress of every compliance task. The customised templates for conducting CDD, KYC, etc., help ensure risk-based AML compliance.

Rapid Implementation

The new technologies enabled unified AML software tailored for dealers in precious metals and stone, which can only be truly effective if systems are integrated efficiently, fine-tuned and adjusted to different jurisdictional requirements as well. The seamless integration and implementation of unified AML software must be supported by robust governance, and explainability should be a design priority for the system to be effective in addressing complex financial crimes.

Tailored Support

One-size-fits-all is never a practical principle in business. The AML software must support customisation, allowing businesses to tailor the AML compliance software as per their business needs and compliance obligations of Dealers in Precious Metals and Precious Stones. The customer support and implementation required during migration from manual compliance processes to unified AML software is customised to bridge the data migration issues and ensure that relevant regulatory obligations for an entity are met, to ensure the transition is hassle-free while outperforming traditional, manual compliance programs by being adaptable and scalable.

World-Class AML Consultancy Services

There are hardly any solutions in the RegTech market that combine AML compliance software products and AML consultancy services backed by ACAMS-certified AML compliance professionals, dissolving AML compliance worries of DPMS through a single platform.

Cloud-Based Architecture

Cloud-based integrated AML software enables faster deployment cycles and frictionless stability. As it does not require physical storage spaces or enormous server rooms, which are significant overhead costs for compliance professionals, unified AML software outperforms manual compliance by being a cost-effective solution for AML compliance.

Top-Tier Security

A unified AML software must be built to ensure data security, data privacy, and compliance with local data protection regulations. It is important to protect the confidential data from any unauthorised access and data corruption throughout the entire compliance lifecycle.

Collaboration Tools

A unified AML software encompasses data integration, data quality and automated monitoring all in real-time, which ensures efficiency and enhanced risk analysis. Seamless integration of existing business processes, systems and databases streamlines AML compliance management without disrupting routine business operations.

Record Keeping

A unified AML software acts as a central record repository for DPMS that ensures all transaction records and CDD documentation are stored securely and can be retrieved easily, thus improving compliance efforts significantly. The retention of the necessary AML records and documents must be enabled by the AML software, and given the inherent vulnerabilities of the Precious Metals and Stones (PMS) sector, the software should maintain a complete audit trail and history of the compliance activities, including screened reports, alerts generated, and transactions monitored which would aid in preserving documentary evidence.

The Precious Metals and Stones (PMS) sector is valuable not only for its aesthetic qualities but also for its use in technology and industry. A unified AML software provides an end-to-end solution to automate, streamline and enhance the entire compliance lifecycle, turning a regulatory burden and cost centre into a strategic competitive advantage.

In Unity Lies Strength

Why Go for Pieces When You Have the Puzzle